Thursday, October 17, 2013

Japanese Candlestick Basics. Simple Pattern.

Candlesticks are usually composed of the body (black or white), an upper and a lower shadow (wick). The wick illustrates the highest and lowest traded prices of a stock, and the body the opening and closing trades. If the stock went up, the body is white, with the opening price at the bottom of the body and the closing price at the top. If the stock went down, the body is black, with the opening price at the top and the closing price at the bottom. A candlestick need not have either a body .Simple PatternsThere are multiple forms of candlestick chart patterns, with the simplest depicted at right. Here is a quick overview of their names:1)White candlestick - signals uptrend movement (those occur in different lengths; the longer the body, the more significant the price increase)2)Black candlestick - signals downtrend movement (those occur in different lengths; the longer the body, the more significant the price decrease)3)Long lower shadow - bullish signal (the lower wick must be at least the body's size; the longer the lower wick, the more reliable the signal)4)Long upper shadow - bearish signal (the upper wick must be at least the body's size; the longer the upper wick, the more reliable the signal)5)Hammer - a bullish pattern during a downtrend (long lower wick and small or no body); Shaven head - a bullish pattern during a downtrend &amp; a bearish pattern during an uptrend (no upper wick);6)Hanging man - bearish pattern during an uptrend (long lower wick, small or no body; wick has the multiple length of the body.Inverted hammer - signals bottom reversal, however confirmation must be obtained from next trade (may be either a white or black body);Shaven bottom - signaling bottom reversal, however confirmation must be obtained from next trade (no lower wick);Shooting star - a bearish pattern during an uptrend (small body, long upper wick, small or no lower wick)7)Spinning top white - neutral pattern, meaningful in combination with other candlestick patterns8)Spinning top black - neutral pattern, meaningful in combination with other candlestick patterns9)Doji - neutral pattern, meaningful in combination with other candlestick patterns10)Long legged doji - signals a top reversal11)Dragonfly doji - signals trend reversal (no upper wick, long lower wick)12)Gravestone doji - signals trend reversal (no lower wick, long upper wick)13)Marubozu white - dominant bullish trades, continued bullish trend (no upper, no lower wick)14)Marubozu black - dominant bearish trades, continued bearish trend (no upper, no lower wick)